How will TOMS VAT be affected post-Brexit?

Flexibility and preparedness for possible restructuring will be vital as Brexit threatens to change the TOMS VAT regime for travel operators, warns HWB’s travel industry specialist James Flood.

The UK is due to leave the EU on 29 March 2019, with a transitional period agreed until 31 December 2020, and this could spell the end, or at least amendments, to the Tour Operators’ Margin Scheme (TOMS). Travel businesses use the Europe-wide scheme to calculate how much VAT is payable on holidays they sell. TOMS is significant as it allows travel companies to avoid having to register and pay VAT in every country they operate in.

Depending on the final deal struck, it is possible that TOMS will remain if a VAT union with the EU is agreed. The alternative, likely with a “hard” Brexit, could mean operators having to register and account for VAT in every member state where services are applied.

James Flood, who specialises in the Travel Industry, said: “There is ongoing uncertainty around whether TOMS VAT will be allowed to continue between the UK and the EU in the post-Brexit landscape.

“With no definitive answers, I would advise travel companies to keep a watchful eye on how this area develops. It may be worth having contingency plans in place with regards to how a change could affect pricing structures. The administrative burden of having to set up overseas VAT registrations could potentially be significant, but there will be solutions available.

“Whatever the future agreement with the EU, it seems likely that TOMS will be amended following a recent consultation by the European Commission, so I would urge the sector to keep up to date.”

If you would like further information on how Brexit may affect taxes for travel operators, please contact James Flood on 023 8046 1244.